Mastering Capital Expenditure (CAPEX)
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Questions and Answers

What is capital expenditure (CAPEX)?

  • Costs incurred in the hiring of employees for the organization
  • Costs incurred in the day-to-day running of the organization
  • Costs incurred in the procurement of assets for the organization (correct)
  • Costs incurred in the marketing and advertising of the organization

    • What is the difference between CAPEX and OPEX?

  • CAPEX are costs incurred in the day-to-day running of the organization, while OPEX are costs incurred in the procurement of assets for the organization
  • There is no difference between CAPEX and OPEX
  • CAPEX are usually low cost, while OPEX are usually high cost
  • CAPEX are accounted for over several accounting periods, while OPEX are accounted for in the period in which they're incurred (correct)

    • What are some examples of CAPEX?

  • Rent and administration costs
  • Selling and distribution costs
  • Monthly bills and low-value procurements
  • One-off purchase and machinery (correct)

    • What are some examples of OPEX?

    <p>Monthly bills and low-value procurements</p> Signup and view all the answers

    How does the procurement approach differ for CAPEX and OPEX?

    <p>The procurement team conducts more thorough analysis for CAPEX than OPEX</p> Signup and view all the answers

    Study Notes

    Capital Expenditure (CAPEX)

    • CAPEX refers to the funds used by a company to acquire, upgrade, or maintain physical assets such as property, buildings, equipment, and technology.
    • CAPEX is a long-term investment in the company's infrastructure, expected to provide benefits over a period of time.

    Operating Expenditure (OPEX)

    • OPEX refers to the day-to-day expenses incurred by a company to operate and maintain its business.
    • OPEX is a short-term cost, typically expensed in the current period.

    Examples of CAPEX

    • Purchasing new equipment or machinery
    • Building a new factory or office
    • Upgrading existing technology infrastructure
    • Acquiring a new business or asset

    Examples of OPEX

    • Salaries and wages of employees
    • Rent and utilities for offices and facilities
    • Marketing and advertising expenses
    • Travel and training expenses

    Procurement Approach

    • CAPEX typically involves a more formal and structured procurement approach, with a specific budget and approval process.
    • OPEX, on the other hand, may involve a more flexible and ongoing procurement approach, with a focus on meeting immediate business needs.
    • The procurement approach for CAPEX tends to be more strategic and long-term, while OPEX is often more tactical and short-term.

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    Description

    Test your knowledge on Capital Expenditure (CAPEX) with our quiz! Explore the characteristics and examples of CAPEX, including one-off purchases, machinery, and investment focus. Learn how these costs are accounted for over several accounting periods and why they are usually high cost investments. Ace this quiz and gain a better understanding of CAPEX and its impact on an organization's financial health.

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